ELR Citation: ELR 20078
No(s). 04-1515 (2d Cir. Apr 25, 2006)

The court upholds summary judgment in favor of an insurance company over policyholders' claims against it for rejecting a settlement offer in an underlying suit concerning lead poisoning to a young child. The policyholders argued that the rejection constituted bad faith because it exposed them to the risk of an adverse judgment that significantly exceeded their policy limits. But there were no obstacles preventing the policyholders from entering into a settlement agreement with the underlying plaintiffs. The policyholders were represented not only by counsel appointed by the insurance company, but also by private counsel who could have taken any number of steps to shield them from financial liability for the child's injuries. Where, as here, the policyholders were represented by private counsel and had ample opportunity to protect their own interests, the insurance company's refusal to consent to a declaratory judgment action brought by the underlying plaintiffs did not constitute a "deliberate or reckless failure" to consider the policyholders' interests in negotiating a settlement.